Regan Arts - Base Scenario

Regan Arts - Base Scenario 2015 Income Statement & Cash Flow Key Assumptions Revenue - Income Statement - Revenue derived is based on the lay down quantities as proposed by RA Sales team (done in conjunction with S&S) - Laydown quantities are the quantities that the sales team are committing to sell - The selling list price is reduced by the average discount rate of 53%. (This is the industry standard discount rate) - The model assumes laydown occurs during the month of publication of the book - Returns then occur 3 months after laydown. Return rates vary based on category of book: - Fiction 50% - Other 40% - Illustration 30% - The model spreads the returns over 3 months: 60%in Month 1, 20% in month 2 and 20% in Month 3 Expenses - Income Statement - Most expenses are based on the expenses per the Individual Title Budgets which are prepared by Production Director - PPB (Paper Print & Binding) unit cost comes from the individual title budgets. - Plant Expense (Costs to Develop the book) unit cost again comes from the individual title budgets. - PPB and Plant expenses units are based on the laydown units less the returned units and match the month of revenue and returns. - Royalties are based on the % contractually agreed on each title - Royalty %and expense increases based on the number of books sold. - Note in the P&L for simplicity we booked royalty expense in total during the laydown ( Publication month) (Units are laydown quantities less returns). - Selling and Distribution (paid to our distributor) is 13% of Revenue. The contract stipulates a flat 10% but also includes additional charges, such as special packaging, etc. and this model assumes an additional 3%. - Marketing & Promotion (M&P) spend comes from the individual title budgets. As a guide $1.00 per hardcover copy $0.50 to $0.75 per paperback. - Freight spend comes from the individual title budgets. - M&P and Freight expense is booked in total during the publication month. Cash Flow - Inflows - Cash is received 60 days after invoicing/publication. (e.g. February revenue is paid in April) - Note during months where no books are published, returns of earlier publications could result in negative revenue. - Cashflow model shows the total revenue and selling & distribution on a separate line (note actual cash received is the net of these 2 lines). Cash Flow - Outflows - Royalty Advances (14) are the commitments we have made in 2014. These are the installments that we have to pay per title in 2015. - Royalty Advances (15) is a placeholder for advances on titles that will be produced in 2016 and beyond. The model front loads (75%) in the first half of 2015. - PPB payments occur in the month of invoicing/publication and are based on the total print run per the individual title budget, not the laydown quantities. - Plant expense payments occur in the month of invoicing/publication and are based on the individual title budget, not laydown quantities. - Other expenses (salaries etc.) are based on the P&L and occur in the month the expense is occurred. - The Cash Flow Model also includes a capex placeholder of $240k.($200k in leasehold improvements for the proposed move and $40k in Computer equipment, printers etc.) PrePazed bY Murphy/O. nina 12/8/2014 EFTA01116382 Regan Arts FY 2015 Revenue by Title Title Author Publication Date Invoice Date Month Print Run Initial Laydown Founders & Failures Colleen Taylor 1/31/2016 1/9/2016 Jan-16 15,000 9,500 The Art of the Pimp Dennis Hof 3/17/2015 2/23/2015 Feb-15 50,000 40,000 The Secret to Getting Into College Pria Chatterjee 3/20/2015 3/2/2015 Mar-1S 10,000 12,000 Immunity Taylor Antrim 3/31/2015 3/9/2015 Mar-1S 15,000 12,000 Out Came the Sun MariN Hemingway 4/7/2015 3/16/2015 Mar-1S 30,000 22,000 Dear Diary 'Mom why are you so sad" MariN Hemingway 4/7/2015 3/16/2015 Mar-1S 10,000 8,500 My Fight Ronda Rousey 4/10/2015 3/23/2015 Mar-1S 125,000 70,000 How Dante Can Save Your Life Rod Dreher 4/10/2015 3/23/2015 Mar-1S 50,000 9,500 The Gluten Lie Levinovitz 4/21/2015 3/30/2015 Mar-1S 25,000 15,000 Journey of the Heroic Parent Dr. Brad Reedy 4/21/2015 3/30/2015 Mar-1S 20,000 10,500 Dept Lev AC Rosen 4/28/2015 4/6/2015 Apr-15 8,000 11,500 M aweird Nicholas M alis 42: '15 4 6 2015 A • -15 25''' 27,500 Lithe Book of Lunch Caroline Craig/Sophie Missing S/5/2015 413/2015 Apr-15 15,000 11,500 Wall Street Wars Richard Farley 5/12/2015 420/2015 Apr-15 10,000 10,500 Wall Street Wars- Author Buyback Richard Farley 5/13/2015 421/2015 Apr-15 2,500 0 The Nakeds Lisa Glatt 6/2/2015 5/11/2015 May-15 12,500 10,500 Smile Photo Book VU Photo, LLC 6/2/2015 5/11/2015 May-15 12,500 5,250 At Night She Cries, While He Rides His Steed Ross Patterson 6/9/2015 S/18/2015 May-15 8,000 9,500 Shed: How To Sha • - Into Somethin ... Linda Gra 6 16/2015 S/25 2015 M -15 40,000 15,000 The Compass of Sympathy Kermit Roosevelt 6/23/2015 6/1/2015 Jun-15 21,500 9,500 Trousdale Estates, Beverly Hills... Steven M. Price 6/30/2015 6/8/2015 Jun-15 7,500 4,250 Trousdale Estates, Beverly Hills..(Deluxe Ed.) Steven M. Price 6/30/2015 6/8/2015 Jun-15 S00 SSO Invaders Karolina Waclawiak 7/7/2015 6/15/2015 Jun-15 10,000 9,500 Mrs. Mulderbach's Way Will Akers 7/10/2015 6/22/2015 Jun-15 15,000 9,500 Lolito Ben Brooks 7/21/2015 6/29/2015 Jun-15 10,000 7,500 Blue-Print: Believe The Truth Bill Stanton/Craig Horowitz 7/28/2015 7/6/2015 Jul-15 10,000 9,500 The Lie Of Doing What You Love Miya Tokumitsu 8/4/2015 7/13/2015 Jul-15 10,000 9,000 Jimmie Lee &James: Two Lives, Two Deaths Steve Fiffer/Adar Cohen 8/11/2015 7/20/2015 Jul-15 7,500 10,500 La Harlow: A Marvelous Life La Harlow Aurora Flores 9 015 10 2015 Au 15 10,000 10,500 Drone Warrior Brett Velicovich/Christopher Stewart 9/29/2015 9/7/2015 Sep-15 145,000 77,500 What's In My Food? Dwight Eschilman/Steve Ettinger 9/29/2015 9/7/2015 Sep-15 16,000 17,500 Found Peter Mercurio 10 6 '15 9 14 2015 Se • 15 60,000 9 S00 Untitled Parentin: Book-Children's Activit Book B. Akerlund 10 13 2015 9 2015 Se• 15 25,000 10,000 Untitled Cookbook: " Born to Bake(Bien Cuit bread book) Zachary Golper 10/27/2015 10/5/2015 Oct-15 20,000 13,500 Untitled Cookbook: Monster baking book Christine McConnell 10/27/2015 10/5/2015 Oct-15 36,000 20,000 The Best Of OMG Posters Mitch Putnam 10 7 2015 10 5 2015 Oct-15 6 SOO 11,500 The Art Of Hollywood Scenic Painting Karen Maness/Richard Isackes 11/3/2015 10/12/2015 Oct-15 7 SOO 4,500 Gentlemen's Guide: Sporting Guide Liz Goldwyn 11/3/2015 10/12/2015 Oct-15 —t 15,000 16,000 Macklemore Ryan Lewis/Ben Haggerty 11/3/2015 10/12/2015 Oct-15 75,000 75,000 The Art Of Hollywood Scenic Painting(Deluxe Ed) Karen Maness/Richard Isackes 11/0/2015 10/13/2015 Oct-15 S00 S00 992,000 662,050 FY 2015 0 306,550 78,405 72,150 168,219 48,171 537,100 72,710 106,634 102,897 67,975 227,014 95,165 115,494 0 85,748 43,223 56,066 111,438 56,066 80,419 22,746 58,490 40,831 43,974 56,066 63,761 86,000 87,462 750,909 203,794 92,099 162,676 222,262 247,124 272,167 127,773 196,257 1,060,118 117,500 6,351,496 Prepared by J. Murphy/D. Ilina 12/8/2014 EFTA01116383 Regan Arts Income Statement 2015 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 FY 2015 Revenue• 0 510,916 2,001,261 788,696 408,485 29,982 (11,954) (231,755) 2,363,144 992,756 (111,908) (388,129) 6,351,496 Direct Costs PPB 0 80,000 269,080 139,135 55,230 27,330 (8,448) (33,911) 196,332 438,014 (16,649) (56,864) 1,089,249 Plant Expense 0 21,456 92,401 69,478 43,082 43,071 26,142 (9,886) 42,352 143,752 (13,661) (18,682) 439,505 Royalty 0 86,240 305,942 80,432 50,027 56,608 28,342 17,192 255,116 461,215 0 0 1,341,113 Selling & Distribution 0 66,419 260,164 102,530 53,103 3,898 (1,554) (30.128) 307,209 129,058 (14,548) (50,457) 825,694 0 254,115 927,587 391,575 201,442 130,906 44,483 (56,734) 801,008 1,172,039 (44,858) (126,002) 3,695,561 Gross Mann 0 256,801 1,073,674 397,121 207,043 (100,924) (56,437) (175,021) 1,562,136 (179,283) (67,050) (262,126) 2,655,935 Other Expenses M&P 0 50,000 285,000 58,000 73,000 62,500 27,500 5,000 246,000 153,000 0 0 960,000 Freight 0 11,791 64,464 12,926 16,412 16,085 6,266 2,433 59,087 50,764 0 0 240,228 Salaries- Existing Employees 142,265 142,265 142,265 142,265 142,265 142,265 142,265 142,265 142,265 142,265 142,265 142,265 1,707,180 Salaries- New Employees 50,875 50,875 50,875 50,875 50,875 50,875 50,875 50,875 50,875 50,875 50,875 50,875 610,500 Overhead 67,300 67,300 67,300 67,300 67,300 67,300 67,300 67,300 67,300 78,300 67,300 67,300 818,600 260,440 322,231 609,904 331,366 349,852 339,025 294,206 267,873 565,527 475,204 260,440 260,440 4,336,508 Net Profit (260,440) (65,430) 463,770 65,755 (142,809) (439,949) (350,643) (442,894) 996,609 (654,487) (327,490) (522,566) (1,680,573) • Negative revenue occurs in months where no books are published and we have returns of earlier publications. Prepared by J. Murphy/D. Ilina 12/8/2014 EFTA01116384 Regan Arts Cash Flow - 2015 Jan-15 Feb-15 Mar-15 A r-15 Ma 15 Jun-15 Jul-15 Au -15 15 Oct-1S Nov-1S Dec-15 FY 2015 Cash Inflow Revenue 0 0 0 510,916 2,001,261 788,696 408,485 29,982 (11,954) (231,755) 2,363,144 992,756 6,851,532 Selling & Distribution 0 0 0 (66,419) (260,164) (102,530) (53103) (3,898) 1,554 30,128 (307,209) (129,058) (890,699) 0 0 0 444,497 1,741,097 686,165 355,382 26,084 (10,400) (201,627) 2,055,935 863,698 5,960,833 Cash Outflow Royalties - Advances (14)• 141,000 91,250 295,000 205,000 1,250 0 0 33,750 368,750 230,000 10,000 65,000 1,441,000 Royalty Advances (15) 250,000 250,000 250,000 250,000 250,000 250,000 83,333 83,333 83,333 83,333 83,333 83,333 2,000,000 PPB 0 100,000 473,350 123,700 116,725 158,700 44,775 17,000 456,920 526,305 0 0 2,017,475 Plant Expense 0 26,820 133,546 65,080 73,347 92,903 46,644 14,500 108,424 185,000 0 0 746,264 Salaries & Fringe Benefits 193,140 193,140 193,140 193,140 193,140 193,140 193,140 193,140 193,140 193,140 193,140 193,140 2,317,680 Other Overhead 67,300 67,300 67,300 67,300 67,300 67,300 67,300 67,300 67,300 78,300 67,300 67,300 818,600 M&P 0 50,000 285,000 58,000 73,000 62,500 27,500 5,000 246,000 153,000 0 0 960,000 Freight 0 11,791 64,464 12,926 16,412 16,085 6,266 2,433 59,087 50,764 0 0 240,228 Capes (LHI & Computers) 70,000 70,000 70,000 10,000 0 0 10,000 0 0 10,000 0 0 240,000 721,440 860,301 1,831,800 985,146 791,174 840,628 478,958 416,456 1,582,954 1,509,842 353,773 408,773 10,781,247 Net Cash Flow (721,440) (860,301) (1,831,800) (540,649) 949,923 (154,463) (123,576) (390,372) (1,593,354) (1,711,469) 1,702,162 454,925 (4,820,414) • Commitments made in 2014 for tides published in 2015. This does not reflect payments made In 2014. Prepared by 1. Murphy/D. Ilina 12/8/2014 EFTA01116385 Expense Title Yearly Salary bin-15 Feb.15 Mar-15 Apr-15 May-15 lun-1S Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 FY2015 Existing Employees CEO 050,000 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 450,000 Head of Production 140,000 11,667 11,667 11,667 11,667 11,667 11,667 11,667 11,667 11,667 11,667 11,667 11,667 140,000 Editorial Intern 32,000 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 32,000 Editorial Intern 32,000 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 2,667 32,000 Editor 50,000 4,167 4,167 4,167 4,167 4,167 4,167 4,167 0,167 0,167 0,167 4,167 4,167 50,000 Senior Editor 10Q000 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 100,000 M.-v.-late Editor 55,000 0,583 4,583 4583 4,383 4,583 4,583 4,583 0,583 0,583 0,583 4,583 4,583 55,000 Managing Editor 50,000 0,167 4,167 4,167 4,167 4,167 4,167 4,167 0,167 0,167 0,167 4,167 4,167 50,000 Executive Editor and Associate Publisher 160,000 13,333 13,333 13,333 13.333 13,333 13,333 13,333 13,333 13,333 13,333 13,333 13,333 160,000 Head of Marketing and Publicity 100,000 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 100,000 Head of Sales 90,000 7,500 7,500 7,500 7.300 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 90,000 Creative Director 250,000 10,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 250,000 Finance Manager (40% Allocation) 29,000 2,017 2,417 2,017 2,017 2,017 2,017 2,017 2,417 2,417 2,017 2,417 2,417 29,000 Total Salaries 118,167 128,167 128,167 128,167 128,167 128,167 128,167 128,167 128,167 128,167 128,167 128,167 1.538,000 Fringe & Benefits 11% 14,098 14,098 14,098 14,098 10,098 10,098 10.098 10,098 10.098 10.098 14.098 14.098 169,180 Total Salaries and Fringe Benefits-Existing Employees 142,265 142,265 142,265 142,265 102,265 102,265 102,265 142,265 142,265 142,265 102,265 142,265 1,707,180 New Hires Director of Publicity 150,000 12,500 12,500 12,500 12.300 12,503 12,500 12,500 12,500 12,500 12,500 12,500 12,500 150,000 Junior Publicist 75,000 6,250 6,250 6,250 6250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 75,000 Executive Assistant 75,000 6,250 6,250 6,250 6250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250 75,000 Editorial Assistant 40,000 3,333 3,333 3,333 3.333 3,333 3,333 3,333 3,333 3,333 3,333 3,333 3,333 40,000 Senior Editor 150,000 12,500 12,500 12,500 12.300 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 150,000 Interior Designer 60,000 5,030 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000 Total Salaries 45,833 45,833 45,833 45,833 45,833 45,833 45,833 45,833 05,833 05,833 45,833 45,833 550,000 Fringe & Benefits 11% 5,002 5,042 5,042 5,042 5,002 5,002 5,002 5,002 5,002 5,002 5,042 5,002 60,500 Total Salaries and Fringe Benefits - New Hires 50,875 50,875 50,875 50,875 50,875 50,875 50,875 50.875 50,875 50,875 50,875 50,875 610,500 Total Salaries and Fringe Benefits for Existing and N ew 193,140 193,140 193,140 193,140 193,140 193,140 193,140 193.140 193.140 193.140 193,140 193,140 2,317,680 Prepared by 1 Murphy/D.91(1a 12/8/2014 EFTA01116386 Expense Jan-15 Feb-15 Mar-15 Apr-15 May-I5 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 FY 2015 Rent • 327,600 27,300 27,300 27,300 27,300 27,300 27,300 27,300 27,300 27,300 27,300 27,300 27,300 327,600 0 Other Overheads 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000 Insurance 0 0 0 0 0 0 0 0 0 11,000 0 0 11,000 Legal Fees 10,000 10,000 10,000 10,000 10000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000 Travel and Entertainment 5,000 5,000 5.000 5,000 5,000 5.000 5,000 5,000 5,000 5,000 5.000 5,000 60,000 'I eta! Overhead 67,300 67,300 67,300 67,300 67,300 67,300 67,300 67,300 67,300 78,300 67,300 67,300 818,600 • 6,300 square feet at $52 Prepared by J. Murphy/D. Nina 12/8/2014 EFTA01116387